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The Iran conflict may shake the foundation of global currency, and the petrodollar system faces a key test
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Hello everyone, today XM Forex will bring you "[XM Group]: The Iran conflict may shake the foundation of global currency, and the petrodollar system faces a key test." Hope this helps you! The original content is as follows:
The continued escalation of the situation in the Middle East is bringing to the forefront an issue that originally belonged to the macro-structural level - whether the petrodollar system is heading towards an inflection point.
Analysts pointed out that the impact of the Iran conflict may go far beyond the energy price fluctuation itself. Its more far-reaching potential consequences are that the global energy settlement system may become loose, thus weakening the core position of the US dollar in the international reserve and trading system.
There may be cracks in the energy settlement system
For a long time, the U.S. dollar’s global dominance has been closely related to the energy market. International oil trade is generally priced, invoiced and settled in US dollars. This mechanism requires countries to hold large amounts of US dollar assets when importing energy, thus consolidating the core position of the US dollar in the global reserve system.
But under the current situation, this logic is facing challenges.
If transportation in the Strait of Hormuz is substantially disrupted, or the regional security environment continues to deteriorate, some countries may be forced to explore alternative settlement methods to reduce reliance on the single currency system. Analysts believe that this “passive de-dollarization” path may be more realistic than policy promotion.
Deutsche Bank warns: A "perfect storm" is forming
Deutsche Bank strategist Mallika Sachdeva pointed out in the latest report that the current situation constitutes a "perfect storm" for the petrodollar system.
The report believes that the dominance of the US dollar in cross-border trade is largely based on the petrodollar cycle, and the basis of this cycle - energy flow, security and capital return - are changing at the same time.
Specifically, three major structural changesParticularly critical:
First of all, the United States has transformed into a net exporter of energy, and its dependence on Middle East oil has dropped significantly;
Secondly, the focus of Middle East oil exports has clearly shifted to Asia, with emerging economies such as China becoming the main demander;
Thirdly, regional conflicts have given rise to a new assessment by the market of the stability of the United States' security xmaccount.commitments.
In this context, the traditional circulation mechanism of “exchanging safety for U.S. dollars and U.S. dollars returning to U.S. assets” faces the risk of marginal weakening.
Non-USD transactions are expanding
In fact, the “de-dollarization” of oil trade did not start with this round of conflicts.
In recent years, affected by sanctions, Iran and Russia have adopted non-US dollar settlement methods for energy transactions on a considerable scale. The xmaccount.combined crude oil supply of the two countries accounts for approximately 14% of global consumption, and changes in their trading models have created a certain demonstration effect in the global energy market.
At the same time, some Gulf countries are also trying to diversify settlement paths. Examples include trials of cross-border payments through central bank digital currency infrastructure and the introduction of non-USD pricing in certain transactions.
There is also news in the market that during the recent tense period, conditional settlement arrangements denominated in RMB have appeared in certain energy transportation arrangements, indicating that alternative mechanisms are moving from the margins to practical applications.
The reserve system may face revaluation
The core of the petrodollar system lies not only in the transaction itself, but also in the global capital cycle formed thereby.
Under the traditional model, energy exporting countries accumulate U.S. dollar reserves through oil revenue and invest them in assets such as U.S. Treasury bonds, thus supporting the United States’ long-term financing at lower costs. This mechanism has been called the "excessive privilege" enjoyed by the United States.
However, if energy trade gradually shifts to multi-currency settlement and some oil-producing countries adjust their foreign exchange reserve structure, the demand for U.S. dollar assets may be affected, which will have a profound impact on the global capital flow pattern.
Changes in the energy structure are exacerbating long-term pressure
In addition to geopolitical factors, the transformation of the global energy structure is also weakening the long-term foundation of the petrodollar system.
With the advancement of renewable energy, nuclear energy and local energy development, countries' dependence on imported fossil fuels is expected to decrease. This means that demand for the U.S. dollar as a medium of energy trading may also decrease.
Analysts point out that a world that becomes more independent in terms of energy and security may also have a more diversified foreign exchange reserve structure.
The status of the US dollar may shift from "dominance" to "competition"
Nevertheless, most analysts believe that this process is more likely to be a gradual evolution rather than a sudden turning point.
In the short term, the U.S. dollar still has liquidity and institutional advantages, and its core position in the global financial system is difficult to be replaced quickly. However, in the medium to long term, with the increase in settlement currency options, the US dollar’s exclusive position may gradually shift to a multi-polar xmaccount.competition pattern.
It is worth noting that in this round of geopolitical conflicts, the U.S. dollar has not shown a typical sharp increase in risk aversion. This phenomenon has also been regarded by some market participants as a signal of its "change in marginal attractiveness."
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